July 26, 2013

New York Superintendent of Financial Services Benjamin Lawsky, as Receiver for Executive Life Insurance Company of New York (ELNY), has announced the proposed liquidation date and the proposed date of closing of the ELNY Restructuring Agreement will be August 8, 2013.
ELNY's shortfall payees, including hundreds of structured settlement
recipients, can expect their payment reductions to take effect shortly
thereafter.

ELNY first entered rehabilitation
in 1991 when then New York Insurance Commissioner Salvatore Curiale
obtained a Court Order seizing control of the company. The Nassau New
York State Supreme Court approved a Plan of Rehabilitation for ELNY in
1992. Neither the ELNY Order of Rehabilitation in 1991 nor the ELNY Plan
of Rehabilitation in 1992 determined that ELNY was insolvent.

Under the Rehabilitation Plan,
owners of ELNY single premium deferred annuities (SPDA), interest
sensitive life policies, whole life policies and term policies were
given the option to have Metropolitan Life Insurance Company (MetLife)
assume their policies. However, all of ELNY's single premium immediate
annuities (including all ELNY structured settlement annuities) remained
with ELNY under the supervision of the Insurance Superintendent and his
agent, the New York Liquidation Bureau (NYLB). The Rehabilitation Plan
named MetLife as Administrator of the ELNY single premium immediate
annuities (SPIAs) and payees continued to receive their scheduled
annuity payments as part of the Rehabilitation Plan.

The first public announcement
that ELNY was experiencing financial problems during its Rehabilitation
occurred in December of 2007 when then New York Governor Eliot Spitzer
reassuringly announced an “Agreement in Principle” designed to continue paying all ELNY annuitants 100 percent of their benefits. Unfortunately, the “Agreement in Principle” never materialized.

The first audited financial statements
for ELNY during its Rehabilitation were released in 2009 for years 2006
and 2007. Those financial statements showed that, as of December 31,
2007, ELNY had assets of $1,344,729,904 and liabilities of
$2,538,548,125 resulting in a negative surplus of $1,193,818,221.
Subsequent financial statements for years 2008-2010 indicated a
deteriorating financial condition. As of December 31, 2010, ELNY had
assets of $905,945,201 and liabilities of $2,474,317 resulting in a
negative surplus of $1,568,372,142.

On December 17, 2010, Nassau County New York State Supreme Court Judge John M. Galasso issued an Order to Show Cause
requiring New York's Insurance Superintendent to present the Court with
a proposed Order and Plan of Liquidation for ELNY on or before July 1,
2011. As justification for ELNY's proposed liquidation, the Petition, which was ultimately filed September 1, 2011, stated: “ELNY's financial condition is progressively deteriorating” and “ELNY
will be unable to pay its outstanding lawful obligations as they mature
in the regular course of business and further efforts to rehabilitate
ELNY are futile . . . . the unprecedented global economic crisis and
resulting market collapse of 2008 had a significant negative impact on
ELNY's retained assets and made continued implementation of the
Rehabilitation Plan without a liquidation unfeasible."

The ELNY Restructuring Plan
submitted to, and approved by, Judge Galasso was jointly prepared by
the Superintendent and the National Organization of Life and Health
Guaranty Associations (NOLHGA). Under the Restructuring Plan,
participating state life and health guaranty associations (PGAs) and
certain life insurance companies have formed a new special purpose
not-for-profit captive insurance company under the laws of the district
of Columbia to replace ELNY once it is liquidated. The PGAs have agreed
to supplement the ELNY benefit payments for annuity contracts eligible
for state guaranty association coverage up to the maximum allowable by
their state guaranty association laws. The various participating life
companies have agreed to provide additional enhancements and have set up
an ELNY Hardship Fund.

The Restructuring Plan includes Schedule 1.15
listing all of ELNY's current annuities, with the names of the annuity
owners and payees redacted. Schedule 1.15 includes additional
information such as individual contract identification numbers, the
proposed "uncovered amount" (shortfall) and "total percentage of contract protected"
assuming contributions from state life and health insurance guaranty
associations and certain supplemental enhancements. Following the
Schedule 1.15 filing, the NYLB sent informational notices to each ELNY annuity payee and published weekly notices in the New York Times and the Wall Street Journal.

Judge Galasso signed the ELNY Order of Liquidation
and Approval of the ELNY Restructuring Agreement on April 16, 2012 (as
proposed by the Superintendent and despite objections by several
structured settlement payees and their attorneys) following a two week
hearing March 15-30, 2012.

The anticipated shortfalls resulting from the ELNY liquidation and restructuring were expected to total $920,641,977
on a present value basis as of April 16, 2012. This figure assumed
promised state guarantee association payments and enhancements but did
not include possible payments from the ELNY Hardship Fund and/or from structured settlement defendants
who negotiated and promised to pay future periodic payments funded with
ELNY annuities. As a result, approximately 15 percent of the ELNY
annuitants are expected to experience an average present value loss of
more than $600,000 per annuitant. The remaining ELNY annuitants are not expected to experience any reduction in their payments.

As part of his ELNY Liquidation Order, Judge Galasso granted judicial immunity "to
the Receiver and his successors in office, the New York Liquidation
Bureau, and their respective attorneys, agents and employees, ... for
any cause of action of any nature against them, individually or jointly,
for any action or omission by any one or more of them when acting in
good faith, in accordance with this Order, or in the performance of
their duties pursuant to Insurance Law Article 74 ..."

The Order also enjoined all persons "from
commencing or further prosecuting any actions at law or other
proceedings against ELNY or its assets, the Receiver or the New York
Liquidation Bureau, or their present or former employees, attorneys, or
agents, with respect to this proceeding or the discharge of their duties
under Insurance Law Article 74."

Subsequent ELNY-related litigation and court filings followed:

Appeal of Liquidation Order
- On March 30, 2012, attorneys representing ELNY structured settlement
shortfall payees filed a Notice of Appeal challenging the ELNY
Liquidation Order and Restructuring Agreement. Both the Appellate
Division of the Supreme Court of the State of New York, Second
Department and the New York State Court of Appeals subequently denied
this Appeal.

Class Action Lawsuit
- On November 8, 2012, attorneys representing ELNY structured
settlement shortfall payees filed a class action lawsuit in the United
States District Court Southern District of New York against
Superintendent of Financial Services of the State of New York, in his
non-regulatory capacity as ELNY's Receiver, including predecessor ELNY
Receivers, Metropolitan Life Insurance Company (MetLife) and Credit
Suisse Group, AG (Credit Suisse) as defendants. The class action
Complaint alleged the defendants' mismanagement and misconduct had
caused the plaintiffs' ELNY payment shortfalls.

Contempt Order
- On December 7, 2012, responding to the ELNY shortfall payees' class
action lawsuit, Superintendent Lawsky filed a Notice of Motion seeking
to enforce Judge Galasso's ELNY injunctions and to hold the ELNY
shortfall payees' attorneys in contempt of Judge Galasso's ELNY Liquidation
Order. On January 25, 2013, Judge Galasso issued an Order holding the ELNY
shortfall payees' attorneys in contempt of court and imposing a fine for
filing the class action lawsuit.

Dismissal of Class Action
- As a result Judge Galasso's Contempt Order, the ELNY shortfall payees
voluntarily dismissed their class action lawsuit on February 7, 2013
without prejudice thereby preserving their right to re-file claims and
tolling the statute of limitations.

Appeal of Contempt Order
- On February 14, 2013, three ELNY structured settlement shortfall
payees and their attorneys filed a Notice of Appeal challenging Judge
Galasso's Contempt Order. That Appeal currently remains unresolved.

May 03, 2013

The New York State Court of Appeals (Court of Appeals), New York's highest judicial authority, has denied a Motion for Leave to Appeal a February 6, 2013 decision bythe
Appellate Division of the Supreme Court of the State of New York,
Second Department which rejected a legal challenge by Executive Life of
New York (ELNY) structured settlement shortfall payees to the ELNY Order
of Liquidation and Approval of the ELNY Restructuring Agreement signed
by New York State Supreme Court Judge John M. Galasso on April 16, 2012.

The appeal challenging the merits of the ELNY Liquidation Order had raised three primary issues each of which the Court of Appeals' decision effectively rejected:

Due Process - "Did
inadequate notice and the denial of information to Objectors (ELNY
structured settlement shortfall payees), along with the selective
application of the Civil Practice Law and Rules, deny Objectors a fair
hearing as required by principles of due process?"

Immunity - "Did
the Supreme Court exceed its subject matter jurisdiction or otherwise
err in granting immunity to the Receiver and others in their personal
capacities, where such immunity is not provided for by statute, is
inconsistent with the common law, and is unsupported by evidence?"

Injunction - "Did
the Supreme Court exceed its jurisdiction or otherwise err in
permanently enjoining claims against the Receiver and others in their
personal capacities, where such injunction is not provided for by
statute or the common law, and no evidence was adduced at the hearing?"

The Court of Appeals decision effectively ends litigation challenging the merits of the ELNY Liquidation Order
and permits the National Organization of Life and Health Insurance
Guaranty Association (NOLHGA) to proceed with the ELNY Restructuring
Agreement including substantial annuity payment reductions for more than
1400 structured settlement recipients.

ELNY Contempt Order and Class Action Lawsuit

Another anticipated result
of the Court of Appeals decision will be the filing of a brief by legal
counsel for three ELNY structured settlement shortfall payees (objector
respondents) to perfect their appeal of a Contempt Order
issued January 25, 2013 by Judge Galasso. Based upon previous court
filings and out-of-court statements, they are expected to argue that
Judge Galasso's Contempt Order violates the United States Constitution.

Following Judge Galasso's Contempt Order, attorneys representing the structured settlement shortfall payees voluntarily dismissed their federal court ELNY class action lawsuit
, without prejudice, preserving their right to refile claims and
tolling the statute of limitations. At that time, shortfall payee
attorney Edward Stone characterized the voluntary dismissal as a "strategic decision"
attributable to the Contempt Order which left open the possibility of
additional fines for continued legal efforts to protect ELNY shortfall
payees.

In a letter written to United States District Judge Jesse M. Furman prior to the voluntary dismissal of the ELNY class action lawsuit, shortfall payee attorney Roger Christensen quoted from the 1964 United States Supreme Court decision in Donovan v. City of Dallas: "Early
in the history of our country, a general rule was established that
state and federal courts would not interfere with or try to restrain
each others proceedings. That rule has continued substantially unchanged
to this time."

Christensen's letter continued: "It
could not be more clear that a state court cannot enjoin a federal
action or use contempt proceedings to preclude citizens' attempts to
have their claims heard in federal court."

The original class action Complaint named Jeanice Dolan, Daniel A. Malin, Keith Vincent, and other similarly situated ELNY shortfall victims, as plaintiffs,
and Benjamin M. Lawsky, Superintendent of Financial Services of the
State of New York, in his non-regulatory capacity as ELNY's Receiver,
including predecessor ELNY Receivers (Rehabilitator), Metropolitan Life
Insurance Company (MetLife) and Credit Suisse Group, AG (Credit Suisse)
as defendants.

Based upon allegations of defendant misconduct (see: ELNY Allegation Timeline), the original class action Complaint requested the following damages and relief:

"Damages
equaling the full present value of each Class Member's annuity issued
by ELNY, less any amount determined to be owing to Plaintiff under the
terms of ELNY's liquidation;

"Damages equaling the amount of each defendant's unjust enrichment and ill-gotten gains;

"Attorney fees and litigation expenses, to the extent permitted by contract or law;

"Pre- and post-judgment interest, to the extent provided by contract or law; and

February 18, 2013

Three Executive Life of New York (ELNY) structured settlement
shortfall payees (objector respondents) and their legal counsel have
filed a Notice of Appeal dated February 14, 2013 challenging "each and every part" of a Contempt Order issued January 25, 2013 by New York Supreme Court Judge John Galasso "on questions of both fact and law".

Judge Galasso's Contempt Order:

Responded to a federal class action lawsuit filed November 8, 2012 by the three ELNY structured settlement shortfall payees, as plaintiffs, against Benjamin M. Lawsky,
Superintendent of Financial Services of the State of New York, in his
non-regulatory capacity as ELNY's Receiver, including predecessor ELNY
Receivers (Superintendent), Metropolitan Life Insurance Company and
Credit Suisse Group, AG, as defendants.

Determined
the federal class action lawsuit violated three ELNY injunctions:
injunctions contained in the ELNY Rehabilitation Order (1991) and the
ELNY Rehabilitation Plan Approval (1992) as well as an injunction in
Judge Galasso's April 16, 2012 ELNY Liquidation Order which states: "All
persons are enjoined and restrained from commencing or further
prosecuting any actions at law or other proceedings against ELNY or its
assets, the Receiver or the New York Liquidation Bureau, or their
present or former employees, attorneys, or agents, with respect to this
proceeding or the discharge of their duties under Insurance Law Article
74."

Imposed a fine, payable by the ELNY
shortfall payees’ legal counsel to the Superintendent for costs,
disbursements and reasonable attorney’s fees the Superintendent had
incurred defending the federal class action and for pursuing the
contempt application plus potential additional legal expenses assuming
the Superintendent achieved a favorable result in the concurrent appeal of the ELNY Liquidation Order which was denied February 6, 2013 by the Appellate Division of the Supreme Court of the State of New York, Second Department.

Acknowledged: "This Court is not empowered to dismiss the federal complaint outright."

Following
Judge Galasso's Contempt Order and the denial of their Liquidation
Order appeal, attorneys representing the structured settlement shortfall
payees voluntarily dismissed their ELNY class action lawsuit without prejudice preserving their right to refile claims and tolling the statute of limitations.

Attorney Edward Stone characterized the voluntary dismissal as a "strategic decision"
attributable to the Contempt Order which left open the possibility of
additional fines for continued legal efforts to protect ELNY shortfall
payees.

The objector respondents and their legal counsel, attorneys Stone, Roger Christensen and Karra Porter,
have six months to perfect their appeal of Judge Galasso's Contempt
Order with the same appellate court that denied their earlier appeal of
the ELNY Liquidation Order. Based upon previous court filings and
out-of-court statements, they are expected to argue, in part, thatJudge Galasso's Contempt Order violates the United States Constitution.

In a letter written to United States District Judge Jesse M. Furman prior to the voluntary dismissal of the ELNY class action lawsuit, attorney Christensen quoted from the 1964 decision of the United States Supreme Court in Donovan v. City of Dallas: "Early
in the history of our country, a general rule was established that
state and federal courts would not interfere with or try to restrain
each others proceedings. That rule has continued substantially unchanged
to this time."

Christensen's letter continued: "It
could not be more clear that a state court cannot enjoin a federal
action or use contempt proceedings to preclude citizens' attempts to
have their claims heard in federal court."

January 28, 2013

Attorney Edward Stone and representatives of the Christensen & Jensen law firm, who are representing Executive Life of New York (ELNY) structured settlement shortfall payees in multiple legal actions, have responded to a contempt order issued January 25, 2013 by New York State Supreme Court Judge John M. Galasso
with a press release announcing their plan to pursue an appeal with the
Appellate Division of the Supreme Court of the State of New York.

Judge Galasso's contempt order against the ELNY shortfall payee attorneys followed their filing of an ELNY class action lawsuit
in the United States District Court Southern District of New York
(federal court) which Judge Galasso ruled was a violation of existing
ELNY anti-lawsuit injunction orders.

Stone and Christensen & Jensen filed the ELNY class action November 8, 2012 against Benjamin M. Lawsky, Superintendent of the New York Department of Financial Services, (Superintendent) and his predecessors, in their “non-regulatory” capacities as ELNY receivers, claiming breach of fiduciary duty and fraudulent omission among other allegations. The class action complaint also named Metropolitan Life Insurance Company and Credit Suisse Group, AG as defendants.

Judge Galasso's contempt order also included a fine, payable by the ELNY shortfall payee attorneys to the
Superintendent, for costs, disbursements and reasonable attorney’s fees
the Superintendent has incurred defending the federal class action and
for pursuing the contempt application plus potential additional legal
expenses if the Superintendent achieves a favorable result in the ELNY
appeal. For purposes of the fine, the Superintendent's attorney fees are capped at $5000.

New
York State Supreme Court Judge John M. Galasso decided to hold
attorneys for structured settlement victims in civil contempt for filing
a class action lawsuit in the United States District Court for the
Southern District of New York despite acknowledging that "This Court is
not empowered to dismiss the federal complaint outright".

We
are disappointed that Judge Galasso interprets the injunctions as
broader in scope than the immunity provisions contained in the various
orders issued in connection with the failed rehabilitation of The
Executive Life Insurance Company of New York dating back to 1991. On the
other hand, we agree that Galasso is not empowered to dismiss the
federal complaint and we look forward to the day when the victims of
this tragedy will have a chance to shed light on what actually
transpired with ELNY over the past 21 years. We intend to do everything
we can to shed light on what led to this insurance industry failure of
epic proportions.

For more than 21 years,
victims have been kept in the dark while assets set aside to provide for
their long term needs were squandered on the Superintendent's watch. We
asked the Superintendent to look into the single largest failed effort
at "Rehabilitation" in the history of the State of New York and he
refused. We regret Superintendent Lawsky's decision to pursue contempt
sanctions and we obviously interpret the injunctions differently than
Judge Galasso does. We plan on pursuing an appeal on substantive and
constitutional grounds with the Appellate Division."

Additional Resources

For additional S2KM reporting about the ELNY contempt proceeding, see:

January 27, 2013

New York Supreme Court JudgeJohn M. Galasso has ordered legal counsel for three Executive Life of New York (ELNY) structured settlement shortfall payees in civil contempt
for filing an ELNY class action lawsuit in the United States District
Court Southern District of New York (federal court) in violation of
existing ELNY anti-lawsuit injunction orders.

Despite issuing the contempt order, Judge Galasso acknowledged:

"This Court is not empowered to dismiss the federal complaint outright"; and

"The results of the pending [s]tate appeal may also impact the viability of the federal action."

ELNY Class Action and Appeal

Attorney Edward Stone and representatives of the Christensen & Jensen law firm, the attorneys subject to the contempt order, filed the ELNY class action lawsuit November 8, 2012 in federal court against the Superintendent and his predecessors, in their “non-regulatory” capacities as ELNY Receivers, claiming breach of fiduciary duty and fraudulent omission among other allegations. The class action complaint also named Metropolitan Life Insurance Company and Credit Suisse Group, AG as defendants.

Attorneys for the Superintendent filed a Notice of Motion January 18, 2013 with the United States District Court to:

Dismiss the ELNY class action complaint in its entirety with prejudice pursuant to Federal Rule of Civil Procedure (FRCP) 12(b)(6).

Questions concerning immunity and due process, which are also raised in the pending ELNY appeal, were not subjects of the contempt proceeding. Oral arguments in the ELNY appeal have concluded and a decision is expected shortly.

Fine Imposed

Judge Galasso's January 25, 2013 contempt order also imposes a fine, payable by the ELNY shortfall payees’ legal counsel to Benjamin M. Lawsky,
Superintendent of New York's Department of Financial Services
(Superintendent), for costs, disbursements and reasonable attorney’s
fees the Superintendent has incurred defending the federal class action
and for pursuing the contempt application plus potential additional
legal expenses if the Superintendent achieves a favorable result in the ELNY appeal.

The
ELNY contempt order indicates Judge Galasso will determine the amount of the
fine without a hearing upon receipt of an affidavit in support of the
Superintendent's attorney’s fees, costs and disbursements along with a
proposed judgment. For purposes of the ELNY contempt fine, the
Superintendent's attorney fees will be capped at $5000.

Three Injunctions

Three ELNY injunctions
were at issue in the contempt proceeding: injunctions contained in the
ELNY Rehabilitation Order (1991) and the ELNY Rehabilitation Plan
Approval (1992) as well as an injunction in Judge Galasso's April 16,
2012 ELNY Liquidation Order. The injunction in the Liquidation Order states:

"All
persons are enjoined and restrained from commencing or further
prosecuting any actions at law or other proceedings against ELNY or its
assets, the Receiver or the New York Liquidation Bureau, or their
present or former employees, attorneys, or agents, with respect to this
proceeding or the discharge of their duties under Insurance Law Article
74."

The ELNY Liquidation Order also discharged
the Superintendent, as Rehabilitator, and his agents, employees, etc.,
from any liability for their acts prior to the approval of the ELNY
Rehabilitation Plan in the performance of their duties related to the
ELNY rehabilitation. That discharge was in addition to any statutory or other immunity to which they might be entitled.

Judge Galasso's Reasoning

The Superintendent's motion for contempt must be considered within the context of the Court enforcing its own directives.

Counsel
for plaintiffs should to be held in contempt if, by commencing the
federal lawsuit against the Superintendent, an order has been disobeyed.

New
York insurance law permits a judge to issue injunctions or orders
during an Article 74 rehabilitation or liquidation to prevent
interference with the Receiver or the plan.

The ELNY orders are a matter of public record, clearly expressed and unequivocal.

The Superintendent, and his predecessors are prejudiced by being sued.

The
ELNY class action contention that no harm or waste will inure to the
ELNY estate as a result of the federal action is not supported by the
ELNY shortfall payees' arguments that:

The federal claims are against the Superintendent and his predecessors in their personal capacity; and/or

The
federal complaint does not seek damages payable from the ELNY estate
assets or prevent the ELNY Liquidation Order from proceeding as
directed.

On their face, the allegations in the federal complaint are neither "ultra vires" nor illegal.

Naming
the Superintendent and his predecessors, in their non-regulatory
capacity, as defendants in the federal complaint without clearly
prosecuting them in their individual capacities "appears to be a deliberate obfuscation in an effort to avoid a charge of violating the mandates of the state injunctions still in force." (emphasis added)

Additional Resources

For additional S2KM reporting about the ELNY contempt proceeding, see:

January 20, 2013

Attorneys for Benjamin M. Lawsky, Superintendent of
Financial Services of the State of New York, in his capacity as Receiver
of Executive Life Insurance Company of New York (ELNY), filed a Notice of Motion January 18, 2013 with the United States District Court Southern District of New York to:

Dismiss the ELNY class action complaint in its entirety with prejudice pursuant to Federal Rule of Civil Procedure (FRCP) 12(b)(6).

The Notice of Motion also states:

In
response to a letter and phone call from Superintendent Lawsky's
attorneys setting forth reasons why the class action lawsuit should be
dismissed, plaintiffs' attorneys communicated they would not amend their
complaint prior to the filing of the motion; and

Court rules
require plaintiffs to file opposing affidavits or memoranda by February 1,
2013 and Superintendent Lawsky to file any replies by February 8, 2013.

Background and Related Legal Actions

New York State Supreme Court Judge John M. Galasso approved an Order of Liquidation and Restructuring Agreement for ELNY on April 16, 2012 which were subsequently appealed by 18 ELNY structured settlement shortfall payees. Oral arguments in the appeal have been concluded and a decision is expected shortly.

The ELNY class action, which was filed November
15, 2012, alleges mismanagement of ELNY during its 21 year
rehabilitation by Superintendent Lawsky in his
non-regulatory capacity as ELNY's Receiver, including predecessor ELNY
Receivers, Metropolitan Life Insurance Company and Credit Suisse Group, AG as defendants.

For S2KM's re-configuration of selected allegations from the ELNY class action complaint, see the "ELNY Allegation Timeline".

In a related legal action, attorneys for Superintendent Lawsky have filed a separate Notice of a Motion
with the Nassau County New York State Supreme Court to enjoin the ELNY
structured settlement shortfall payees and their legal counsel from
proceeding with their class action lawsuit and to hold the shortfall payees' legal counsel in contempt.

Supporting Legal Memorandum

In support of Superintendent Lawsky's motion to stay or dismiss the ELNY class action lawsuit, his attorneys also filed an accompanying memorandum of law (legal memorandum) plus a declaration with exhibits.

The legal memorandum filed with the Superintendent's Notice of Motion characterizes the class action complaint as:

Seeking "to
circumvent ongoing proceedings in the New York Supreme Court that are
subject to New York’s comprehensive Insurance Law, and thereby make an
end run around that court’s anti-suit injunctions and other rulings" and

"[A]n
attempt to obtain a preference over other ELNY creditors, which New
York law prohibits and they and their counsel were unsuccessful in
obtaining from the Receivership Court."

Burford Abstention Argument

Superintendent Lawsky's legal memoradum argues that a Burford abstention is warranted as "the Second Circuit repeatedly has held in suits involving the Superintendent during pending Article 74 proceedings."
This case, according to the Superintendent's attorneys, satisfies four
factors the Second Circuit has previously recognized in determining
whether a Burford abstention is appropriate:

Specificity - New York Insurance Law Article 74 is specific and comprehensive and has “particularly detailed provisions concerning [insurance company] rehabilitation and liquidation.”

Substantial state concern
- New York Insurance Law’s rehabilitation and liquidation provisions
constitute “a matter of special state concern.” Continuation of the ELNY
class action lawsuit "would disrupt New York’s unified administrative
and judicial framework for the administration of the estates of
insolvent insurance companies.”

Debatable construction
- Continuation of the ELNY class action lawsuit would require the U.S.
District Court to determine how Article 74's priority rule "requires any recovery to be apportioned." It would undoubtedly result in plaintiffs seeking "to
collaterally litigate and debate issues related to Article 74 (some of
which the Receivership Court already has ruled upon.)"

Minimal federal interests - The ELNY rehabilitation has been ongoing for a long time and presents no issues of federal law while there has been no "relative progress of the federal action."

FRCP 12(b)(6) Argument

As an alternative argument, the Superintendent's legal memorandum maintains the plaintiffs' class action claims should be dismissed pursuant to FRCP 12(b)(6)"because
they lack standing to assert their claims and, even if they had
standing, the claims would fail for [four] additional reasons."

Any
alleged financial harm was sustained by the ELNY estate, and thus any
claim belongs to the ELNY estate and not to individual creditors of the
ELNY estate.

Plaintiffs "fail to plead either a fraudulent
omission claim with particularity or a plausible breach of fiduciary
duty claim against Superintendent Lawsky." The class action complaint only mentions Superintendent Lawsky twice and neither allegation states a claim.

December 30, 2012

At one time or another, each of us may have become acquainted with individuals who have overcome personal injuries and successfully transformed their disabilities and special needs into special lifetime accomplishments. Kyle Walsh, profiled in a 2012 S2KM blog post, is one such individual. The late Randy Snow, featured in a 2008 S2KM blog series, was another.

Structured settlements are supposed to provide
economic security for people with serious injuries and disabilities -
to help them rebuild their lives and, in many cases, to achieve special
lifetime accomplishments. Instead of an all-cash personal injury
settlement, structured settlement recipients accept a promise of future
periodic payments.

What happens, if and when, that promise is broken?
What happens when a structured settlement funding company, and the
regulators and guaranty system responsible for protecting the structured
settlement recipients, fail to make and/or insure full payment?

These questions are highlighted by the Executive Life of New York
(ELNY) liquidation - the dominant structured settlement story of 2012
and one of the most important developments in the history of the United
States structured settlement industry.

The story of ELNY,
as well as its affiliate Executive Life of California (ELIC), and their
parent company, First Capital Corporation (FEC), is long and complex.
For background of events prior to ELNY's 1991 receivership, S2KM
recommends Gary Schulte's 1992 book "The Fall of First Executive".

Significantly, neither
the 1991 ELNY Rehabilitation Order nor the 1992 Order approving the
ELNY Rehabilitation Plan declared ELNY to be insolvent. When then New
York's Insurance Commissioner Salvatore Curiale seized control of ELNY
on April 16, 1991 and placed it in receivership, he stated: "The
company is currently neither in an insolvent or impaired condition. . . .
I have not petitioned the Court to make a finding of insolvency. ELNY
is a company well able to meet its current obligations."

Exactly
twenty-one years later, on April 16, 2012, following 11 days of
hearings at the Nassau County New York Supreme Court, presiding Judge John M. Galasso approved an Order ofLiquidation and a Restructuring Agreement
for ELNY as proposed by the Superintendent of the New York State
Department of Financial Services (Superintendent), as ELNY's Receiver,
and the National Organization of Life and Health Guaranty Funds
(NOLHGA).

The result of the ELNY Liquidation Order and
Restructuring Plan, even following contributions from state guaranty
funds and voluntary life insurance company contributions, is a $900 million shortfall
allocated entirely (and arguably inequitably) to more than 1400 ELNY
payees out of a total of approximately 9700 current ELNY payees. The
remaining ELNY payees expect to receive 100 percent of their promised
future payments. The average individual shortfall is estimated to exceed
$600,000 present value. Although an ELNY Hardship Fund has been created, it has not yet been funded.

An appealwas filed
May 30, 2012, on behalf of 18 ELNY structured settlement shortfall
payees, challenging the ELNY liquidation order and restructuring
agreement on the basis of due process. The appeal also alleges that
immunities and injunctions granted under the liquidation order are
improper. Oral arguments
occurred on November 15, 2012 in Brooklyn before the Appellate Division
of the Supreme Court of the State of New York, Second Department. No
decision has been announced.

Another legal challenge to the ELNY liquidation order occurred June 14, 2012 when attorneys for several liability insurers filed a Motion asking Judge John Gallasso to "clarify and/or correct" his April 16, 2012 ELNY Memorandum Decision. The motion indirectly raises the issue
of whether qualified assignments extinguish the liability of defendants
and/or liability insurers for shortfall payments resulting from the
ELNY liquidation? Judge Galasso denied the Motion without further explanation.

In a subsequent development, somewhat related to the liability insurers' motion, the ELNY website announced an ELNY Facilitation Plan
to assist owners of ELNY structured settlement annuities (SSAs) make
supplemental payments to ELNY SSA payees and to coordinate those
payments with the ELNY benefit payments scheduled to be made by the
Guaranty Association Benefits Company (GABC) under the ELNY
Restructuring Plan approved by Judge Galasso on April 16, 2012 as part
of the ELNY liquidation order.

The same attorneys who filed the ELNY appeal, Edward Stone and representatives of the Christensen & Jensen law firm, filed a class action lawsuit November 8, 2012, on behalf of ELNY shortfall victims, against Benjamin M. Lawsky,
Superintendent of Financial Services of the State of New York, and his
predecessor ELNY Rehabilitators, as well as MetLife and Credit Suisse.
The class action allegations
provide a critical litany of mismanagment and non-disclosure during
the 21 years ELNY's estate was being supervised by these defendants.

In response, attorneys representing Benjamin M. Lawsky, in his capacity as ELNY's Receiver, filed a Notice of a Motion
with the Nassau County New York State Supreme Court requesting oral
argument on January 4, 2013 at 9:30 a.m. or as soon thereafter as the
parties may be heard:

to enjoin three ELNY structured settlement shortfall payees and their legal counsel from proceeding with a class action lawsuit in the United States District Court Southern District of New York;

to hold in contempt of court the shortfall payees' legal counsel; and

to require their payment of the related costs and attorney's fees incurred by the Superintendent.

Although the ELNY liquidation has so far received limited coverage in the mainstream media, specialty insurance experts and analysts have not been silent. Examples:

Peter Bickford - In his article titled "The Elephant in the Court Room" (summarized here
by S2KM), Bickford argues New York’s receivership system has failed
ELNY, its policyholders and beneficiaries, as well as the insurance
industry and its customers due to a lack of basic accountability
standards. Although the ELNY restructuring plan may solve the immediate
ELNY problem (at the expense of the remaining ELNY shortfall victims),
Bickford maintains it does not address the broader, underlying systemic
defects inherent in the New York life insurance receivership system.
Without an act of the New York legislature, according to Bickford, "there will be no life insurance guaranty fund coverage in New York"
following ELNY. Bickford's article also provides succinct summaries of
objections raised by ELNY shortfall victims and ELNY legal issues which
he states "could linger in the courts for years"

LifeHealthPro - In an article titled "The Complete ELNY Saga: 21 Years of Mismanagement, Corruption, Broken Promises and Shattered Lives", (summarized here by S2KM), the authors assign primary blame for ELNY insolvency to the NYLB which they describe as "a
rogue agency known for its codes of secrecy and characterized by many
who spoke for this story as ineffective and mismanaged at best, and a
snake pit of corruption at worst". In a companion article (reviewed here by S2KM), writer Warren Hersch asks: "is the structured settlement process in need of reform"? In a follow-up oped article titled "Governor Cuomo I'm Calling You Out", (summarized here
by S2KM), Bill Coffin, LifeHealthPro's Group Editor, charges New York
Governor Andrew Cuomo with personal responsibility to clean up the "ELNY debacle".

The
final results of the ELNY liquidation will depend upon the outcome of
the continuing litigation highlighted in this article. It also remains
to be seen what reforms, if any, will result from the failed ELNY
receivership process.

In conclusion, it should also be noted that ELIC-related litigation continued in 2012 (Garamendi v. Altus Finance S.A.) when a federal jury in Los Angeles rejected a claim by California's Insurance Commissioner that, but for a conspiracy by French investor group Artemis S.A.:

ELIC's
original conservator (then California insurance commissioner John
Garamendi) would have accepted an alternative bid in 1991 by state
insurance guaranty associations; and

The alternative bid would
have retained profits from ELIC's junk bond portfolio for the benefit of
policyholders including ELIC structured settlement recipients.

December 09, 2012

Attorneys representing Benjamin M. Lawsky,
Superintendent of Financial Services for the State of New York
(Superintendent), in his capacity as Receiver of Executive Life
Insurance Company of New York (ELNY), have filed Notice of a Motion
with the Nassau County New York State Supreme Court requesting oral
argument on January 4, 2013 at 9:30 a.m. or as soon thereafter as the
parties may be heard:

to enjoin three ELNY
structured settlement shortfall payees and their legal counsel from
proceeding with a class action lawsuit in the United States District
Court Southern District of New York;

to hold in contempt of court the shortfall payees' legal counsel; and

to require their payment of the related costs and attorney's fees incurred by the Superintendent.

The purpose of motion, according to the notice, "is
to punish the accused for a contempt of court, and such punishment may
consist of fine or imprisonment, or both, according to the law."

This S2KM blog post re-configures selected allegations from the class action complaint into an ELNY "allegation timeline". A copy of the class action complaint is posted on the structured settlement wiki.

ELNY Appeal

Previously, on May 30, 2012, the objector legal counsel, on behalf of 18 ELNY shortfall payees, filed a Notice of Appeal (ELNY appeal) with the Appellate Division of the Supreme Court of the State of New York, Second Department, challenging the Executive Life of New York (ELNY) Order of Liquidation and Approval of the ELNY Restructuring Agreement signed by New York State Supreme Court Judge John M. Galasso on April 16, 2012.

The oral arguments in the ELNY appeal occurred November 15, 2012 and a decision is expected before 2012 calendar year end.

This S2KM blog post summarizes the Appellant/Objectors' appellate allegations that no statutory or common law basis existed for Judge John Galasso's "extraordinarily broad grant of injunctive relief" to protect the Superintendent and his agents, including the New York Liquidation Bureau (NYLB).

This S2KM blog post summarizes the injunction arguments in the Superintendent's appellate brief and the ELNY shortfall payees' reply brief.

Preemptive Correspondence

Prior
to filing the December 8, 2012 Notice of Motion seeking to enforce
injunctions and a contempt order, attorney Steven M. Bierman, representing the Superintendent, and objector legal counsel exchanged preemptive letters, copies of which S2KM has reviewed.

In response to attorney Bierman's threats to file a motion "to enforce the Receivership Orders and to obtain an order of contempt", the objector legal counsel replied in part:

"[W]e
view your recent letter on behalf of the Superintendent as an attempt
at intimidation and as further evidence of complicity by the
Superintendent in the long-standing cover-up regarding the aborted
rehabilitation of ELNY and the illegal wasting of its assets. As you
know such wasting was in direct violation of the Supreme Court's orders."

"[I]f
you do elect to initiate contempt proceedings, you can anticipate a
cross motion raising, among other things, the Superintendent's violation
of the Supreme Court's orders, which are serious and numerous."

"[W]e
are puzzled by the current position taken by Superintendent Lawsky.
While it was proper to name him in the subject complaint, he is
currently in a position to distance himself from the failings of his
predecessors under whose watch the critical failings occurred."

"[W]e
are willing to explore with you the possibility of Superintendent
Lawsky's joining with us in protecting and asserting the rights of the
shortfall payees."

Legal Memorandum in Support of Motion

In
support of their motion to enforce the court's injunctions and for a contempt
order, attorneys for the Superintendent also filed a
Memorandum of Law from which selected excerpts follow:

"During
the rehabilitation and liquidation proceedings of ELNY under Article 74
of the Insurance Law, and consistent with Insurance Law § 7419, this
Court has entered various antisuit injunctions—in 1991, 1992 (which were
continued by this Court’s order on December 17, 2010), and 2012—that
'enjoined and restrained [all persons] from bringing or further
prosecuting any action at law, suit in equity, special or other
proceeding against [ELNY] or its assets, or the Superintendent of
Insurance of the State of New York and his successors in office as
Rehabilitators thereof, or their agents'.”

"In their pending appeal, those objectors and their counsel recognized the force of these injunctions, stating that this Court
'granted the Receiver’s request to permanently enjoin the bringing of
any claims against the Receiver or others, including claims in their
personal capacities.' They also conceded that '[l]eave of the court must be obtained to sue a receiver in his or her representative, as opposed to individual, capacity.'”

"Notwithstanding their admissions that the Court enjoined 'the bringing of any claims against the Receiver,' three
of the objector-appellants, Jeanice Dolan, Daniel A. Malin, and Keith
Vincent ..., through their counsel Edward S. Stone and Roger P.
Christensen, Karra J. Porter, and Kristen C. Kiburtz of Christensen
& Jensen, P.C. ..., recently filed a putative class action in the
United States District Courtfor the Southern District of New York that
violates this Court’s anti-suit injunctions."

"It is literally hornbook law that '[a] violation of an injunction constitutes a contempt.'”

"Here:
(1) this Court’s anti-suit injunctions expressly enjoined actions
against the Superintendent as ELNY’s Receiver, (2) the Objector
Plaintiffs and Counsel unquestionably violated these injunctions by
filing suit in federal district court, (3) Counsel for the
Objector-Plaintiffs admittedly had knowledge of the Court’s injunctions,
and (4) the Superintendent has been prejudiced because, inter alia, he
has had to retain counsel, to analyze the claims, and to begin preparing
a responsive pleading to the federal court complaint against him, which
has distracted from his work and that of his staff in orderly
liquidating ELNY."

"Disobedience of a court order is
'sufficient to sustain a finding of civil contempt, regardless of
motive, where . . . it was calculated to or actually did defeat, impair,
impede, or prejudice the [other party’s] rights.'”

"Counsel
for Objector-Plaintiffs’ refusal to comply with the anti-suit
injunctions has caused the Receiver to incur costs and expenses,
including attorney’s fees (both in analyzing and preparing a response to
the Complaint and in bringing this contempt action)."

"Accordingly,
the Court should include such costs and fees as part of a contempt
order and require Counsel for Objector-Plaintiffs to pay to the
Superintendent the full amount of his costs and attorney’s fees that are
incurred as a result of their contempt."

November 25, 2012

The Executive Life of New York (ELNY)class action lawsuit , filed November 8, 2012 by attorney Edward Stone and representatives of the Christensen & Jensen law firm, on behalf of ELNY shortfall victims, against Benjamin M. Lawsky,
Superintendent of Financial Services of the State of New York, and his
predecessor ELNY Rehabilitators (Superintendent and/or Rehabilitator), MetLife and Credit Suisse, substantially expands the historical allegations of post-1991 ELNY mismanagement and non-disclosure.

What follows is S2KM's re-configuration of selected allegations from the class action complaint into an ELNY "allegation timeline".

For persons seeking more comprehensive understanding of alleged
mismanagement of ELNY during its 21 year rehabilitation, S2KM recommends
reading the ELNY class action complaint which is posted on the structured settlement wiki. The following S2KM blog posts provide additional critiques of the New York Liquidation Bureau's (NYLB) role in ELNY insolvency:

New York's Insurance Superintendent Salvatore Curiale states:
"[ELNY] isn't insolvent and has ample cash on hand to pay life
insurance death benefits and meet annuity payments."

Curiale further
states: "The company is currently neither in an insolvent or impaired
condition. . . . I have not petitioned the Court to make a finding of
insolvency. ELNY is a company well able to meet its current
obligations."

April 23, 1991

ELNY Rehabilitation Court enters an Order of Rehabilitation which prohibits "all" persons, including the Rehabilitator, from "doing or permitting to be done any act or thing which might waste the assets" of ELNY.

Under
ELNY's Order of Rehabilitation, no more than 30 percent of ELNY's
assets can be invested in common stock at any given time. This 30
percent cap is 50 percent higher than the percentage allowed by active
insurance companies.

Consistent
with normal practice, Superintendent Curiale, ELNY's Rehabilitator,
delegates most of his ELNY rehabilitation duties to the New York
Liquidation Bureau [NYLB], directed by a Special Deputy Superintendent
who in 1991 is Kevin Foley.

May 17, 1991
- In a letter to ELNY policyholders, the Superintendent confirms the sole basis for ELNY's rehabilitation has been the risk of policy
surrenders. The letter further states the Superintendent is "presently
analyzing the assets and liabilities of ELNY[.]"

The court also approves an investment advisory and management agreement with a First Boston
affiliate providing for the payment of multi-million dollar fees.

First
Boston (and its successor/purchaser Credit Suisse) subsequently invests
ELNY's assets in violation of its contractual obligations, in violation
of the court's order, in violation of its representations to the NYLB
and the court, and in violation of its fiduciary duties to ELNY
shortfall payees.

Instead,
First Boston and Credit Suisse engage in a pattern of risky investments
that generate high management fees and place ELNY's assets at
considerable risk.

Note: Credit Suisse acquired First Boston Corporation in 1990 but did not phase out the First Boston name until 2006.

June 1991 - The Superintendent contacts the Life Insurance Guaranty Corporation of
New York (LIGCNY) to discuss the disposition of ELNY. MetLife, the
largest domiciled insurance company in New York, has a lead position in
LIGCNY and receives information about ELNY that is not available to
other insurers generally or to the public.

BetweenJune and November 1991

NYLB
enters into discussions with MetLife. Deputy Superintendent Foley is the principal person representing NYLB in these discussions.

Under
an agreement ultimately approved by the Rehabilitation Court, MetLife
receives more than $1.5 billion of ELNY's traditional whole life, term
life and single premium deferred annuity books of business plus $1.5
billion of ELNY's highest-quality assets.

NYLB takes several steps to prevent competitive bids from other insurers.

The
products transferred to MetLife include 52,748 single premium deferred
annuities and 80,891 life insurance policies. This large book of
business allows MetLife to increase its assets by more than $1 billion
at essentially no risk.

In addition to receiving cash, MetLife is allowed to pick and choose from among ELNY's bonds and to charge "substantially higher surrender charges" than allowed under the ELNY contracts.

Part
of the agreement with MetLife includes retention of MetLife to service
ELNY's remaining SPIAs (including structured settlement annuities) with a
monthly fee of $5.50 per payee if payments begin before the last day of
any month and $2.50 per payee if payments have not begun.

Under
this arrangement, ELNY's true liabilities are ascertainable only by
NYLB and MetLife, the only entities with access to the annuity
contracts.

October 9, 1991 - In a
letter to ELNY policyholders and annuitants, the
Superintendent reiterates the original ELNY takeover was due to
surrender requests and further states: "it remains our belief that
ELNY policyholders, annuitants and contract holders will receive 100% of
the amounts due them under any of the options chosen as part [of] the
rehabilitation plan. ... Please be assured that your money is being well
protected and conservatively invested by the Rehabilitator."

January 21, 1992 -
In a letter to ELNY policyholders and annuitants, the
Superintendent states he is proposing a transfer of assets to MetLife
and that "[t]he contemplated exchange and reinsurance agreements [with
MetLife] would place you in a substantially similar position as you were
at the time of the entry of the Rehabilitation Order."

March 26, 1992
- To implement the agreements with First Boston and MetLife, NYLB
submits a proposed ELNY Rehabilitation Plan which the court approves.

First
Boston represents to the court the only possible course of action
is to transfer virtually all of ELNY's investment grade assets to
MetLife in exchange for MetLife assuming ELNY's
obligations to only part of its policyholders.

First
Boston and NYLB represent that with First Boston's management of ELNY's
assets, it is more than 90% certain the remaining ELNY assets will be
sufficient to meet 100% of ELNY's obligations.

Superintendent Curiale represents that, following "an
extensive and detailed analysis ... Petitioner, as Rehabilitator,
determined that the transaction proposed in the Plan would not impose
any unwarranted or unreasonable risks on ELNY's SPIA holders, creditors
or shareholders."

Deputy Superintendent Foley states that, after the transfer, "we will make continued full payment" to annuitants, that he is "fully confident that these payments can and will be made," and that it is a "100 percent guarantee."

NYLB
represents that ELNY's remaining assets and liabilities will be
approximately equal after the transfer of assets to MetLife. In fact,
after the highest-value assets are transferred to MetLife, ELNY's
remaining assets are less that its fixed liabilities by at least $300
million.

From
1992 until 2010, the NYLB never files any reports with or otherwise
updates the ELNY Rehabilitation Court with respect to ELNY's annuities.

April 13, 1992 - In a letter to ELNY policyholders and annuitants, the Superintendent states the proposed transfer of assets to MetLife "best protects all classes of ELNY policyholders and provides security, value, fairness, timeliness and practicality."

"Under the M&R study, the
projected cash flows from the remaining assets [are] sufficient to meet
95% of the SPIA obligations under approximately 99% of the scenerios
tested using ... base case default, recovery, yield and rate of return
assumptions."

1996 - NYLB for the first time refuses unrestricted access by the New York
State Comptroller's office (Comptroller) to its records and personnel.

The Comptroller reports: "During
our work, Department and Bureau officials prevented auditors from
examining relevant records related to the liquidation of one estate and
employee personnel-related records. Our audit was precluded from
interviewing agency managers and operating personnel without senior
management present, thereby creating an environment where those
individuals could not speak freely."

Prior to its takeover of ELNY, NYLB had generally cooperated with audits requested by the Comptroller's office.

For example, no limitations were placed on the Comptroller in 1976, 1984, or 1990.

In 1994, the Comptroller performed a follow up audit limited to items that had not been reviewed in 1990.

1998 - Common stock comprises 38 percent of ELNY's portfolio exceeding the 30 percent limit set by the 1991 Order of Rehabilitation.

1999

A NYLB representative states it could take up to 100 years before ELNY is finally liquidated.

Former Deputy Superintendent Foley begins employment with MetLife as its Vice President of External and Internal Communications.

2000

Common stock comprises as much as 44 percent of ELNY's investment portfolio.

ELNY's common stock portfolio loses hundreds of millions of dollars, nearly one-third of its value.

2001

In a meeting with a potential ELNY investor representative, the then Deputy Superintendent states: "Why would we want to sell [ELNY] when we can sit here and clip coupons all day."

ELNY's common stock portfolio drops another 13 percent.

2002 - ELNY's common stock portfolio drops another 19 percent.

2004 - The NYLB refuses a Comptroller request to perform a comprehensive audit to include a review of ELNY's assets and liabilities.

November 17, 2004 - The Superintendent files suit to quash the subpoenas.

June 30, 2005 - A New York Supreme Court quashes the subpoenas, and the Comptroller appeals.

Late 2005 or early 2006

Then-New York Attorney General Eliot Spitzer campaigns for Governor on an anti-corruption platform.

NYLB
officials approach NOLHGA and the two entities begin working on a plan
to liquidate ELNY without informing the Rehabilitation Court or ELNY's
policyholders and annuitants of ELNY's insolvency.

Under this plan, more than 1400 ELNY annuitants would suffer reduced payments of up to 66 percent.

August 2006 -
Then-Special Deputy Superintendent Jody Hall, who has
responsibility for NYLB, is fired for suspected corruption. She later
pleads guilty and is convicted.

November 2006 - Governor-elect Spitzer identifies an investigation of the NYLB as an important priority for his administration.

2007

On
at least three occasions prior to 2007, groups of potential investors
advise the Superintendent of an interest in purchasing ELNY's assets and
liabilities. On each occasion, the Superintendent directly interposes
impediments to the performance of due diligence and other
investment-related activities.

NYLB personnel begin
contacting insurance companies and others, such as purchasers of
structured settlement payment rights, demanding they contribute money to
shore up ELNY or face punitive actions by the New York Department of
Insurance.

January 2007 - Governor Spitzer appoints Mark Peters as the new Superintendent.

March 6, 2007 - The New York Appellate Division rules the Comptroller can enforce its subpoenas against NYLB.

May 2007 - Superintendent Peters announces NYLB will be subjected to a "top to bottom"
audit by an independent auditor for the first time in NYLB history. The
auditors discover the NYLB's financial records are in complete disarray
requiring the NYLB to "reconstruct" the financial records of all 60 estates under its supervision.

October 11, 2007 - In Dinallo v. DiNapoli
, the New York Court of Appeals holds that, in his capacity as
rehabilitator/liquidator of insurance companies, the Superintendent is
not a state officer. Therefore, acting as the Superintendent's agent,
the NYLB is not a state agency and is not subject to audit by the New
York State Comptroller.

The
announced plan, whereby various insurers and guarantee associations
apparently agree to pay $650 to $750 million to help fund $2 billion of
future ELNY payments, never materializes.

October 2008
- Independent auditors discover NYLB has been understating ELNY's
shortfall by more than $1 billion for years. Examining ELNY's estate as
of December 31, 2006, the auditor concludes ELNY's liabilities exceed
its assets by $1.26 billion.

March 18, 2009 - without notification to ELNY policyholders and annuitants, Judge Daniel Martin signs an Order allowing NYLB to:

"[F]rom
time to time amend the [Investment] Guidelines set by the Rehabilitator
in consultation with his new financial advisors if the Rehabilitator
deems it beneficial to ELNY."

December 17, 2010 - State Supreme Court Judge Galasso orders the Superintendent
to present the Court with a proposed order and plan of liquidation for
ELNY on or before July 1, 2011 after the Superintendent confers with the
New York Life Insurance Company Guaranty Corporation and other
interested parties.

June 23, 2011 -
The Superintendent files a motion to postpone the deadline for filing a
proposed order and plan of liquidation for ELNY from July 1, 2011 to
August 10, 2011 "in order to present a comprehensive and consensual
proposed Plan of Liquidation that maximizes the potential benefits for
ELNY's structured settlement and other annuitants."

August 8, 2011 - Counsel for the Superintendent advises the court the Superintendent 'is not in a position to submit a consensual proposed order and plan of liquidation on or before August 10, 2011" as previously promised. Instead, he anticipates the Superintendent doing so on or about August 26, 2011.

October 3, 2011
- Governor Andrew Cuomo creates the New York Department of Financial
Services by consolidating the New York Insurance and Banking
Departments. The Superintendent of Financial Services becomes the court
appointed fiduciary and Receiver/Rehabilitator of ELNY as well as other
impaired and insolvent insurance companies in New York.

December 2011 - NYLB:

Files an ex parte motion stating its intent to liquidate ELNY.

Notifies ELNY shortfall payees for the first time that their benefits will be cut.

March 2012 -
Following a hearing, Judge Galasso determines ELNY is
insolvent and approves the liquidation plan and restructuring agreement
upon which NYLB and NOLHGA have been collaborating since 2006.

November 20, 2012

Two Executive Life of New York (ELNY) legal actions are currently in process:

ELNY Appeal
- Oral arguments occurred on November 15, 2012 in Brooklyn before the
Appellate Division of the Supreme Court of the State of New York, Second
Department challenging the Executive Life of New York (ELNY) Order of
Liquidation and Approval of the ELNY Restructuring Agreement signed by
New York State Supreme Court Judge John M. Galasso on April 16, 2012.

ELNY Class Action - Attorney Edward Stone and representatives of the Christensen & Jensen
law firm filed a class action lawsuit November 8, 2012 on behalf of
ELNY shortfall victims in the United States District Court Southern
District of New York against defendants Benjamin M. Lawsky,
Superintendent of Financial Services of the State of New York, in his
non-regulatory capacity as ELNY's Receiver, including predecessor ELNY
Receivers (Superintendent/Rehabilitator), Metropolitan Life Insurance Company (MetLife) and Credit Suisse Group, AG (Credit Suisse).

Alleges Judge Galasso "erroneously
denied objectors' request to reject the proposed agreement of
restructuring in connection with the [ELNY] liquidation";

Further alleges Judge Galasso's order:

"[I]mproperly grants and/or continues certain injunctions and immunities and discriminates against the objectors";

"[C]reates impermissible sub-classes of claimants"; and

"[R]eflects
the courts erroneous denial of objectors' requests to adjourn the
hearing ... due to a lack of proper notice of such hearing."

Seeks to compel:

The Superintendent, as ELNY's Rehabilitator, "to
provide certain discovery necessary to, among other things, allow
objectors to demonstrate why the plan should not be approved and submit a
viable competing restructuring plan";

Judge Galasso "to unseal certain documents submitted to the court by the rehabilitator"; and

Further seeks to allow the objectors "to
present evidence (in the form of live testimony by certain witnesses)
rebutting the receiver's experts and otherwise showing that the
proposed-liquidation plan should not have been approved."

S2KM
did not attend the ELNY oral arguments in Brooklyn, N.Y. The following
reporting notes were provided to S2KM by structured settlement shortfall
payees, and their attorney Edward Stone, who did attend the oral arguments and includes their opinions
and observations.

The four appellate judges who heard the oral arguments appeared to understand the complexity of the issues on appeal:

At
least a dozen attorneys supporting the ELNY liquidation plan approved
by Judge Galasso attended the oral arguments, many at the expense of the
ELNY victims.These attorneys included several each representing the
Superintendent and NOLHGA.

Appearing on behalf of the ELNY shortfall payees, attorneyPorter focused
her comments on lower court proceedings that denied ELNY shortfall
payees their basic due process rights including the right to verify
information the Superintendent and NOLHGA relied upon in formulating
their restructuring plan.

Porter also addressed the scope of immunity,
if any, to be accorded the Superintendent under New York law. She asked
the panel to hold the Superintendent's ELNY conduct to the same standard
applicable to all private receivers: good faith and appropriate care
and prudence. She argued there is no basis in either New York or common
law for the immunity and injunctive relief Judge Galasso granted to the
Superintendent and his agents.

Appearing on behalf of the Superintendent, attorneyBierman
claimed the ELNY shortfall payees had been afforded a fair hearing and
noted Judge Galasso had determined the ELNY liquidation and
restructuring plan were appropriate under the circumstances. Bierman
insisted the Superintendent represented all of the ELNY shortfall
victims and acted in their best interest.

Bierman never referenced or
attempted to refute evidence that the Superintendent and his agents
mismanaged the ELNY estate. Instead, he characterized as "galling" that ELNY shortfall payees would challenge the results of the ELNY liquidation hearing and added "no good deed goes unpunished".

Understandably, the ELNY shortfall victims who attended the oral arguments strongly disagree with attorney Bierman as to what is "galling" about the ELNY rehabilitation, liquidation hearing and restructuring plan. What is "galling" to ELNY shortfall victims:

The Superintendent's claim that he acted in their best interests.

The Superintendent's gross mismanagement of the ELNY estate.

Judge Galasso's denial of their basic due process rights.

Judge Galasso's grant of immunity and injunction to:

Protect the Superintendent and his agents from lawsuits; and

Prevent meaningful verification of the Superintendent's assertions.

The judges seemed disinterested in the due process arguments presented by attorney Griffith on behalf of NOLHGA, according to the ELNY shortfall payees who attended the oral arguments. The only question asked: "Wasn't
it always the obligation of NOLHGA's state guarantee association
members to pay their coverage amounts to the ELNY shortfall payees?"